KiwiSaver

The KiwiSaver scheme is a New Zealand voluntary long-term savings scheme which came into operation from Monday, 2 July 2007. The main purpose of the KiwiSaver fund is for retirement savings, but younger participants can also use it to save a deposit for their first home.

A policy initiative of the Fifth Labour Government of New Zealand, it is aimed at improving New Zealand's low average rate of saving. It is governed by various Acts of Parliament including the KiwiSaver Act 2006, passed in September 2006.

Anyone aged 64 and under, who is entitled to live in New Zealand indefinitely and who normally lives in New Zealand, is entitled to join KiwiSaver. Those under 18 require parental consent to join.

Employee participants can choose to contribute 3%, 4% or 8% of their gross pay, and can switch rates three months after setting a rate (unless employers agree to a shorter time frame). These contributions are deducted from an employee's pay, and sent by the employer to Inland Revenue alongside their PAYE tax returns. The self-employed and unemployed can choose how much they want to contribute; while most KiwiSaver schemes have minimum contribution amounts for people in this category, several schemes allow any level of contributions. All eligible participants aged 18 to 64 starting a new job, with some exceptions, are automatically enrolled in KiwiSaver. New employees can choose to opt out from day 14 to day 56 of their employment.

Participants choose to put their savings in one of several "approved savings schemes". They can only belong to one scheme at a time, but can change schemes at any time. If they do not choose a scheme, and the participant is aged 18 or over, they will be assigned either to the employer's default scheme or to a government-selected default scheme. Each scheme offers several managed funds to invest the participants' savings in, with varying degrees of expected risk and return.

Employers are required to contribute at least 3% of an employee's gross pay to the employee's KiwiSaver account. The employer contribution is taxed at the employee's marginal tax rate, so the actual amount the employee receives in their account is between 2.01% and 2.685%.

From the start of the scheme until May 2015, those who joined KiwiSaver received a $1,000 tax-free "kick start" to their KiwiSaver account from the government. The Fifth National Government removed it effective 21 May 2015 as part of its 2015 budget. Those aged 18 and over also receive from the government a "member tax credit" (MTC) of 50 cents per dollar contributed (or part thereof) for the first $1,042.86 contributed per year (1 July to 30 June). The MTC is not a true tax credit; it is a monetary contribution paid by the government via Inland Revenue, mainly to offset the tax paid on interest earned. Those withdrawing KiwiSaver funds to help buy a first home may also get a deposit subsidy of up to $5,000 (existing homes) or $10,000 (new builds) from Housing New Zealand, provided they meet the required income, deposit and house price requirements.

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Wikipedia